Budget 2021

‘Grants for State Discoms will no longer be universal, but subject to milestones achieved’

Richa Mishra/Shishir Sinha New Delhi | Updated on February 02, 2021

Somanathan explained why variation from Revised Estimate (RE) of previous Budget to Budget Estimate (BE) of FY21-22 is very small and when seen BE to BE, it is very big

Niramala Sitharaman’s Budget proposals are more giving than taking — expenditure oriented. Expenditure Secretary TV Somanathan has played a key role in this. In conversation with BusinessLine, Somanathan explained why variation from Revised Estimate (RE) of previous Budget to Budget Estimate (BE) of FY21-22 is very small and when seen BE to BE, it is very big. He also put the record straight on grants for States’ Discoms on why it is a result-based reform scheme. Excerpts:

How do you explain the expenditure number?

Variation from RE to estimate in this Budget is very small, but when you see BE of previous Budget and this, it is very big. Look, it all depends upon the context. RE is full of one-time Covid-19 factor, so it not a good base to compare. RE increase has a complex composition, ₹30.42-lakh crore was initial BE. We announced various packages which has 2-2.5 per cent of GDP. 2 per cent of GDP is ₹4-lakh crore. Totally, it is ₹34.42-lakh crore. In addition, we have loaded lot of food subsidy, taking the number from ₹1.2 to ₹4.23-lakh crore and yet we are only ₹4.32-lakh crore. Packages and food subsidy adjustments should have taken us to ₹36-lakh crore.But we have managed to keep it at ₹34-lakh crore plus because we did a lot of internal re-prioritisation. So, it is BE plus package plus subsidy adjustment minus savings in various demands. Saving was made possible on account of lowering of grants, during FY 2020-21, for 67 grants (out of 101). It was not easy but we had to do as money was scarce.

But subsidy outgo for food and fuel have come down. Why?

Food subsidy has come down because this year (FY 2020-21), we are repaying old borrowings from National Small Saving Funds. We are not only reflecting full food subsidy next year (₹2.5-lakh crore), but this year we have paid for what was budget of ₹1.22-lakh crore, Garib Kalyan Anna Yojana of ₹1.33-lakh crore, which is the requirement for FY 2021-22. During current fiscal, NSSF borrowing has been fully repaid along with those of two previous years. We have almost cleared ₹59,000 crore in the book of Food Corporation of India. Fuel reflects actual subsidy. Fuel is paid in arrears. Fuel company makes the claim, we vet the claims and then pay. There is no change partially due to lower gas prices.

The Budget is seen as more giving than taking. Have you factored in all the recommendations given by Finance Commission?

States’ borrowings have been fully factored in. So also, States’ grants. States have been permitted to borrow 4 per cent of GSDP which is certain while 0.5 per cent is reforms linked. So, there will be ₹8-9-lakh crore of States’ borrowing. Many States have done reforms – 11 have done One Nation-One Ration Card, seven have done Ease of Doing Business, five have done reforms related with property tax and two have done the power. More are expected to do before the February 15. So, this year, overall borrowing by States would be 4.5-5 per cent of GSDP.

How will the package announced for power Discoms work?

There are two aspects here. First the States can permit 0.5 per cent of GSDP as additional borrowing over 4 per cent, subject to power reforms. The second aspect is ₹3-lakh crore grant proposal which is the revamped power Discoms’ scheme. It is a centrally-sponsored scheme and different from UDAY. It will be in form of grant, but not for the entire ₹3-lakh crore. Some parts will be borne by States and the rest by the Centre. Based on the UDAY outcomes, we have recalibrated the scheme.

It is a result-based reform scheme. It is not unconditional flow of money based on trigger of milestones. If a State is not doing anything, it will not get money. We are prepared not to spend ₹3-lakh crore if criteria are not met. UDAY was universal in the coverage. Now, milestones have been defined. Each State has to prepare an action plan and that needs to be approved by the Power Ministry. Once cleared, a little bit of money will be given as advance, but everything else is based on performance.

Any movement on DBT for fertiliser?

That is what the Fertiliser Ministry is considering. It has also launched some pilots. However, in our budget estimation, we have not factored in any change in administration of fertiliser subsidy.

Any change in ₹1.10-lakh crore borrowing for GST Compensation?

No change in our commitment for ₹1.10 lakh crore.

What is happening on the Expenditure Reforms front?

We have said on record that we will be rationalising centrally sponsored schemes. We are also working on rationalising 689 autonomous bodies. We are also creating a few more such as AatmaNirbhara Swasthya Yojana. We have a quinquennial exercise of re-approving ongoing schemes in line with recommendations given by the Finance Commission – which was introduced in 2017 saying, ‘all schemes will coterminus with Finance Commission cycle and will be re-evaluated based on external evaluation report’. This exercise will be done during FY 2021-22 as it is the beginning of quinquennial cycle.

Any reconsideration on DA policy?

It has already been stated that DA/DR will be revised in July 2021. There is no change in the policy.

Published on February 02, 2021

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